THE FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT ACT, 2003 
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ARRANGEMENT OF SECTIONS 
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SECTIONS 

1.  Short title, extent and commencement. 
2.  Definitions. 
3.  Fiscal policy statements to be laid before Parliament. 
4.  Fiscal management principles. 
5.  Borrowing from Reserve Bank. 
6.  Measures for fiscal transparency. 
7.  Measures to enforce compliance. 
7A. Laying of review reports. 
8.  Power to make rules. 
9.  Rules to be laid before each House of Parliament. 
10.  Protection of action taken in good faith. 
11.  Jurisdiction of civil courts barred. 
12.  Application of other laws not barred. 
13.  Power to remove difficulties. 

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THE FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT ACT, 2003 

ACT No. 39 OF 2003 

[26th August, 2003.] 

An Act to provide for the responsibility of the Central Government to ensure inter-generational 
equity in fiscal management and long-term macro-economic stability by 1*** removing fiscal 
impediments  in  the  effective  conduct  of  monetary  policy  and  prudential  debt  management 
consistent  with  fiscal  sustainability  through  limits  on  the  Central  Government  borrowings, 
debt  and  deficits,  greater  transparency  in  fiscal  operations  of  the  Central  Government  and 
conducting fiscal policy in a medium-term framework and for matters connected therewith or 
incidental thereto. 

BE it enacted by Parliament in the Fifty-fourth Year of the Republic of India as follows:— 

1.  Short  title,  extent  and  commencement.—(1)  This  Act  may  be  called  the  Fiscal  Responsibility 

and Budget Management Act, 2003. 

(2) It extends to the whole of India. 
(3)  It  shall  come  into  force  on  such  date2  as  the  Central  Government  may,  by  notification  in  the 

Official Gazette, appoint in this behalf. 

2. Definitions.—In this Act, unless the context otherwise requires,— 

(a) “fiscal deficit” means the excess of total disbursements, from the Consolidated Fund of India, 
excluding repayment of debt, over total receipts into the Fund (excluding the debt receipts), during a 
financial year; 

3[ 4[(aa) “Central Government debt” at any date means— 

(i)  the  total  outstanding  liabilities  of  the  Central  Government  on  the  security  of  the 

Consolidated Fund of India, including external debt valued at current exchange rates; 

(ii) the total outstanding liabilities in the public account of India; and 

 (iii) such financial liabilities of any body corporate or other entity owned or controlled by 
the Central Government, which the Government is to repay or service from the annual financial 
statement, reduced by the cash balance available at the end of that date;] 

(b)  “fiscal  indicators”  means  the  measures  such  as  numerical  ceilings  and  proportions  to  gross 
domestic  product,  as  may  be  prescribed,  for  evaluation  of  the  fiscal  position  of  the  Central 
Government; 

3[  5[(bb) “general Government debt” means the sum total of the debt of the Central Government 

and the State Governments, excluding inter-Governmental liabilities;] 

6[(bc)  “gross  domestic  product”  means  the  sum  of  the  gross  value  added  by  all  resident 
production  units  plus  that  part  of  taxes,  less  subsidies,  on  products,  which  is  not  included  in  the 
valuation  of  output,  during  a  financial  year,  reckoned  at  current  market  prices,  as  published  by  the 
Central Statistics Office from time to time;] 

(c) “prescribed” means prescribed by rules made under this Act; 
6[(ca) „„real gross domestic product‟‟ means gross domestic product, reckoned at constant prices, 

as published by the Central Statistics Office from time to time;  

(cb) „„real output growth‟‟ means growth in real gross domestic product;] 

1. The words “achieving sufficient revenue surplus and” omitted by Act 13 of 2018, s. 210 (w.e.f 31-3-2018). 
2. 5th July, 2004, vide notification No. G.S.R. 395(E), dated 2nd July, 2004, see Gazette of India, Extraordinary, Part II, sec. 3(i). 
3. Ins. by Act 23 of 2012, s. 146 (w. e. f. 28-5-2012). 
4. Subs. by Act 13 of 2018, s. 211, for clause (aa) (w.e.f 31-3-2018). 
5. Subs. by s. 211, ibid., for clause  (bb) (w.e.f 31-3-2018). 
6. Ins.  by s. 211, ibid. (w.e.f 31-3-2018). 

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(d)  “Reserve  Bank”  means  the  Reserve  Bank  of  India  constituted  under  sub-section  (1)  of             

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section 3 of the Reserve Bank of India Act, 1934 (2 of 1934); 
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3.Fiscal policy statements to be laid before Parliament.—(1) The Central Government shall lay in 
each financial year before both Houses of Parliament the following statements of fiscal policy along with 
the annual financial statement and 2[demands for grants except the Medium-term Expenditure Framework 
Statement], namely:— 

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(a) the Medium-term Fiscal Policy Statement; 
(b) the Fiscal Policy Strategy Statement; 
(c) the Macro-economic Framework Statement; 
3[(d) the Medium-term Expenditure Framework Statement.] 

3[(1A) The statements referred to in clauses (a) to (c) of sub-section (1) shall be followed up with the 

Medium-term Expenditure Framework Statement with detailed analysis of underlying assumptions. 

(1B) The Central Government shall lay the Medium-term Expenditure Framework Statement referred 
to in clause (d) of sub-section (1) before both Houses of Parliament, immediately, following the session 
of Parliament in which the policy statements referred to in clauses (a) to (c) were laid under sub-section 
(1).] 

(2) The Medium-term Fiscal Policy Statement shall set forth a three-year rolling target for prescribed 

fiscal indicators with specification of underlying assumptions. 

(3)  In  particular,  and  without  prejudice  to  the  provisions  contained  in  sub-section  (2),  the          

Medium-term Fiscal Policy Statement shall include an assessment of sustainability relating to— 

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 (ii) the use of capital receipts including market borrowings for generating productive assets. 

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(4) The Fiscal Policy Strategy Statement shall, inter alia, contain— 

(a)  the  policies  of  the  Central  Government  for  the  ensuing  financial  year  relating  to  taxation, 
expenditure, market borrowings and other liabilities, lending and investments, pricing of administered 
goods and services, securities and description of other activities such as underwriting and guarantees 
which have potential budgetary implications; 

(b) the strategic priorities of the Central Government for the ensuing financial year in the fiscal 

area; 

(c) the key fiscal measures and rationale for any major deviation in fiscal measures pertaining to 

taxation, subsidy, expenditure, administered pricing and borrowings; 

(d) an evaluation as to how the current policies of the Central Government are in conformity with 
the fiscal management principles set out in section 4 and the objectives set out in the Medium-term 
Fiscal Policy Statement. 
(5) The Macro-economic Framework Statement shall contain an assessment of the growth prospects 

of the economy with specification of underlying assumptions. 

(6)  In  particular  and  without  prejudice  to  the  generality  of  the  foregoing  provisions  the  Macro-

economic Framework Statement shall contain an assessment relating to— 

(a) the growth in the gross domestic product; 
(b) the fiscal balance of the Union Government as reflected in the 5*** gross fiscal balance; 

(c) the external sector balance of the economy as reflected in the current account balance of the 

balance of payments. 

1. Clauses (e) and (f) omitted by Act 13 of 2018, s. 211 (w.e.f. 31-3-2018). 
2. Subs. by Act 23 of 2012, s. 147, for “demand for grants” (w. e. f. 28-5-2012).  
3. Ins. by s. 147, ibid. (w. e. f. 28-5-2012). 
4.  Item (i) omitted by Act 13 of 2018, s. 212 (w.e.f. 31-3-2018). 
5.  The words “revenue balance and” omitted by s. 212, ibid.  (w.e.f. 31-3-2018). 

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1[(6A)  (a)  The  Medium-term  Expenditure  Framework  Statement  shall  set  forth  a  three-year  rolling 
target  for  prescribed  expenditure  indicators  with  specification  of  underlying  assumptions  and  risk 
involved. 

(b) In particular and without prejudice to the provisions contained in clause (a), the Medium-term 

Expenditure Framework Statement shall, inter alia, contain— 

(i)  the  expenditure  commitment  of  major  policy  changes  involving  new  service,  new 

instruments of service, new schemes and programmes; 

(ii)  the  explicit  contingent  liabilities,  which  are  in  the  form  of  stipulated  annuity  payments 

over a multi-year time-frame; 

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(7) The Medium-term Fiscal Policy Statement,  3[the Fiscal Policy Strategy Statement,  the Medium-
term  Expenditure  Framework  Statement]  and  the  Macro-economic  Framework  Statement  referred  to  in 
sub-section (1) shall be in such form as may be prescribed. 

4[4. Fiscal management principles.—(1) The Central Government shall,— 

(a)  take  appropriate  measures  to  limit  the  fiscal  deficit  upto  three  per  cent.  of  gross  domestic 

product by the 31st March, 2021; 

(b) endeavour to ensure that— 

(i) the general Government debt does not exceed sixty per cent.;  

(ii) the Central Government debt does not exceed forty per cent., 

of gross domestic product by the end of financial year 2024-2025;  

(c) not give additional guarantees with respect to any loan on security of the Consolidated Fund of 

India in excess of one-half per cent. of gross domestic product, in any financial year; 

(d) endeavour to ensure that the fiscal targets specified in clauses (a) and (b) are not exceeded after 

stipulated target dates. 

(2)  The  Central  Government  shall  prescribe  the  annual  targets  for  reduction  of  fiscal  deficit  for  the 
period beginning from the date of commencement of Part XV of Chapter VIII of the Finance Act, 2018 
and ending on the 31st March, 2021: 

Provided that exceeding annual fiscal deficit target due to ground or grounds of national security, act 
of war, national calamity, collapse of agriculture severely affecting farm output and incomes, structural 
reforms in the economy with unanticipated fiscal implications, decline in real output growth of a quarter 
by at least three per cent. points below its average of the previous four quarters, may be allowed for the 
purposes of this section. 

(3) Any deviation from fiscal deficit target under sub-section (2) shall not exceed one-half per cent. of 

the gross domestic product in a year. 

(4) The  Central  Government  shall, in  case  of increase  in  real  output  growth  of a  quarter  by  at  least 
three per cent. points above its average of the previous four quarters, reduce the fiscal deficit by at least 
one-quarter per cent. of the gross domestic product in a year. 

1. Ins. by Act 23 of 2012, s. 147 (w. e. f. 28-5-2012). 
2. Item (iii) omitted by Act 13 of 2018, s. 212, (w.e.f. 31-3-2018). 
3. Subs. by Act 23 of 2012, s. 147, for “the Fiscal Policy Strategy Statement” (w.e.f. 28-5-2012). 
4. Subs. by Act 13 of 2018, s. 213, for section 4 (w.e.f. 31-3-2018). 
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(5)  Where  the  fiscal  deficit  is  allowed  to  vary  from  the  target  prescribed  under  the  proviso  to         

sub-section (2) or deviation is initiated under sub-section (4), a statement explaining the reasons thereof 
and  the  path  of  return  to  annual  prescribed  targets  under  this  section  shall  be  laid,  as  soon  as  may  be, 
before both the Houses of Parliament.] 

5. Borrowing from Reserve Bank.—(1) The Central Government shall not borrow from the Reserve 

Bank. 

(2) Notwithstanding anything contained in sub-section (1), the Central Government may borrow from 
the Reserve Bank by way of advances to meet temporary excess of cash disbursement over cash receipts 
during  any  financial  year  in  accordance  with  the  agreements  which  may  be  entered  into  by  that 
Government with the Reserve Bank: 

Provided that any advances made by the Reserve Bank to meet temporary excess cash disbursement 
over cash receipts in any financial year shall be repayable in accordance with the provisions contained in 
sub-section (5) of section 17 of the Reserve Bank of India Act, 1934(2 of 1934). 

1[(3) Notwithstanding anything contained in sub-section (1), the Reserve Bank may subscribe to the 
primary issues of Central Government Securities due to ground or grounds specified in the proviso to sub-
section (2) of section 4.] 

 (4) Notwithstanding anything contained in sub-section (1), the Reserve Bank may buy and sell the 
Central Government securities in the secondary market 2[or converts Central Government Securities held 
by it with other Securities of the Central Government as mutually agreed between the Reserve Bank and 
the Central Government]. 

6. Measures for fiscal transparency.—(1) The Central Government shall take suitable measures to 
ensure greater transparency in its fiscal operations in public interest and minimise as far as practicable, 
secrecy in the preparation of the annual financial statement and demands for grants. 

(2)  In  particular,  and  without  prejudice  to  the  generality  of  the  foregoing  provision,  the  Central 
Government shall, at the time of presentation of annual financial statement and demands for grants, make 
such disclosures and in such form as may be prescribed. 

7.  Measures  to  enforce  compliance.—(1) The  Minister-in-charge  of  the  Ministry  of  Finance  shall 
review,  3[on half-yearly basis], the trends in receipts and expenditure in relation to the budget and place 
before both Houses of Parliament the outcome of such reviews. 

4[(1A) The Central Government shall prepare a monthly statement of its accounts.] 

(2) Whenever there is either shortfall in revenue or excess of expenditure over the 5[prescribed levels] 
during  any  period  in  a  financial  year,  the  Central  Government  shall  take  appropriate  measures  for 
increasing revenue or for reducing the expenditure (including curtailing of the sums authorised to be paid 
and  applied  from  and  out  of  the  Consolidated  Fund  of  India  under  any  Act  so  as  to  provide  for  the 
appropriation of such sums): 

Provided that nothing in this sub-section shall apply to the expenditure charged on the Consolidated 
Fund  of  India  under  clause  (3)  of  article  112  of  the  Constitution  or  to  any  other  expenditure  which  is 
required  to  be  incurred  under  any  agreement  or  contract  or  such  other  expenditure  which  cannot  be 
postponed or curtailed. 

(3)(a) Except as provided under this Act, no deviation in meeting the obligations cast on the Central 

Government under this Act, shall be permissible without approval of Parliament. 

1. Subs. by Act 13 of 2018, s. 214, for sub-section (3) (w.e.f. 31-3-2018).    
2. Ins. by s. 214, ibid. (w.e.f.  31-3-2018). 
3. Subs. by s. 215, ibid., for “every quarter” (w.e.f. 31-3-2018). 
4. Ins. by s. 215, ibid. (w.e.f. 31-3-2018). 
5. Subs. by s. 215, ibid., for  “pre-specified levels mentioned in the Fiscal Policy Strategy Statement and the rules made under 

this Act” (w.e.f. 31-3-2018).  

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(b) Where, owing to unforeseen circumstances, any deviation is made in meeting the obligations cast 
on the Central Government under this Act, the Minister-in-charge of the Ministry of Finance shall make a 
statement in both Houses of Parliament explaining— 

(i) any deviation in meeting the obligations cast on the Central Government under this Act; 

(ii)  whether  such  deviation  is  substantial  and  relates  to  the  actual  or  the  potential  budgetary 

outcomes; and 

(iii) the remedial measures the Central Government proposes to take. 

1[7A.  Laying  of  review  reports.—The  Central  Government  may  entrust  the  Comptroller  and 
Auditor-General of India to review periodically as required, the compliance of the provisions of this Act 
and such reviews shall be laid on the table of both Houses of Parliament.] 

8. Power to make rules.—(1) The Central Government may, by notification in the Official Gazette, 

make rules for carrying out the provisions of this Act. 

(2)  In  particular,  and  without  prejudice  to  the  generality  of  the  foregoing  power,  such  rules  may 

provide for all or any of the following matters, namely:— 

(a) the annual targets to be specified under sub-section (2) of section 4; 

(b) the fiscal indicators to be prescribed for the purpose of sub-section (2) of section 3; 
2[(ba) the expenditure indicators with specifications of underlying assumptions and risk involved 

under clause (a) of sub-section (6A) of section 3;] 

(c)  the  forms  of  the  Medium-term  Fiscal  Policy  Statement,  3[Fiscal  Policy  Strategy  Statement, 
Medium-term  Expenditure  Framework  Statement]  and  Macro-economic  Frame  Work  Statement 
referred to in sub-section (7) of section 3; 

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(d)  the  disclosures  and  form  in  which  such  disclosures  shall  be  made  under  sub-section  (2)  of 

section 6; 

 5[(da)  the  level  of  short  fall  in  revenue  or  excess  of  expenditure  under  sub-section  (2)  of             

section 7;] 

(e) any other matter which is required to be, or may be, prescribed. 

9. Rules to be laid before each House of Parliament.—Every rule made under this Act shall be laid, 
as  soon  as  may  be  after  it  is  made,  before  each  House  of  Parliament,  while  it  is  in  session,  for  a  total 
period of thirty days which may be comprised in one session or in two or more successive sessions, and 
if, before the expiry of the session immediately following the session or the successive sessions aforesaid, 
both Houses agree in making any modification in the rule or both Houses agree that the rule should not be 
made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may 
be;  so,  however,  that  any  such  modification  or  annulment  shall  be  without  prejudice  to  the  validity  of 
anything previously done under that rule. 

10. Protection of action taken in good faith.—No suit, prosecution or other legal proceedings shall 
lie  against  the  Central  Government  or  any  officer  of  the  Central  Government  for  anything  which  is  in 
good faith done or intended to be done under this Act or the rules made thereunder. 

11.  Jurisdiction  of  civil  courts  barred.—No  civil  court  shall  have  jurisdiction  to  question  the 

legality of any action taken by, or any decision of, the Central Government, under this Act. 

12. Application of other laws not barred.—The provisions of this Act shall be in addition to, and 

not in derogation of, the provisions of any other law for the time being in force. 

1. Ins. by Act 23 of 2012, s. 149 (w. e. f.  28-5-2012). 
2. Ins. by s. 150, ibid. (w. e. f. 28-5-2012). 
3. Subs. by s. 150, ibid., for “Fiscal Policy Strategy Statement” (w.e.f. 28-5-2012). 
4. Clause (ca) omitted by Act of 13 of 2018, s. 216 (w.e.f. 31-3-2018).    
5. Ins. by s. 216, ibid. (w.e.f.  31-3-2018).  

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13. Power to remove difficulties.—(1) If any difficulty arises in giving effect to the provisions of 
this Act, the Central Government may, by order published in the Official Gazette, make such provisions 
not inconsistent with the provisions of this Act as may appear to be necessary for removing the difficulty: 

Provided  that  no  order  shall  be  made  under  this  section  after  the  expiry  of  two  years  from  the 

commencement of this Act. 

(2) Every order made under this section shall be laid, as soon as may be after it is made, before each 

House of Parliament. 

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